British Pound Remains on the Defensive After Flash Crash

Sterling remained under pressure at the start of the trading week following last week’s so-called “flash crash”. Sterling faces a potentially tumultuous week ahead as Prime Minister Theresa May heads to Denmark and the Netherlands for bilateral talks with Prime Ministers Rasmussen and Rutte ahead of this month’s EU leaders’ summit. Increasingly fiery rhetoric on both sides of the English Channel has already exploded in epic fashion and may do so again.

The economic calendar is in quiet in European and US hours, leaving the markets to digest recent price action ahead of this week’s headline event risk. Knee-jerk volatility remains a risk however. Bild reported that Deutsche Bank failed to secure a penalty reduction deal with US regulators, which may rekindle insolvency fears and bleed into broader market sentiment. S&P 500 futures are pointing upward however, hinting investors’ mood is relatively chipper for the time being.

The anti-risk Yen traded higher as US-listed Nikkei 225 futures declined in overnight trade. Japanese markets are closed for a holiday. The move may have followed comments from BOJ Governor Kuroda over the weekend, who said the central bank may delay hitting the inflation target until 2018. The remarks may have stoked recent skepticism about the efficacy of the central bank’s stimulus efforts.

The Canadian Dollar recovered in a move that appeared to be corrective after Friday’s broad-based selloff. The Loonie fell against all of its major counterparts alongside crude oil prices in a move that seemed linked to Russia signaling it would not reach a deal with OPEC to cut back output at a meeting in Istanbul this week.

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